Question

Problem 10-1A Straight-Line: Amortization of bond discount LO P2 Hillside issues $2,600,000 of 5%, 15-year bonds dated January 1, 2019, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $2,246,690. Required: 1. Prepare the January 1 journal entry to record the bonds' issuance. 2(a) For each semiannual period, complete the table below to calculate the cash payment. 2(b) For each semiannual period, complete the table below to calculate the straight-line discount amortization. 2(c) For each semiannual period, complete the table below to calculate the bond interest expense. 3. Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life. 4. Prepare the first two years of a straight-line amortization table. 5. Prepare the journal entries to record the first two interest payments. Complete this question by entering your answers in the tabs below. Reg 1 Req 2A to 2C Reg 3 Req 4 Reg 5 Prepare the January 1 Journal entry to record the bonds' issuance. View transaction list Journal entry worksheet

Answer 1

Journal entry
Date	General Journal				Debit	Credit
1/1/2019	Cash				2,246,690
	discount on bonds				353,310
	bonds payable					2,600,000
2-a)	par maturity value			Annual rate	/	year	semi annual cash payment
	2,600,000		*	5%		6./12	65000
							semi annual		Straight line
2-b)	par value		bonds price		Discount		periods		disc amortization
	2,600,000	-	2,246,690	=	353,310	/	30	=	11777
2-c)	Semi annual cash			Discount		bond interest expense
	payment			amortization
	65,000		+	11777	=	76,777
3)	total bond interest expense over life of bonds
	amount repaid
	30	payments of		65,000	1950000
		par value ant maturity			2,600,000
	total repaid				4550000
	less amount borrowed				2,246,690
	total bond interest expense.				2,303,310
4)		unamort	Carrying
	period	discount	value
	1/1/2019	353,310	2,246,690
	6/30/2019	341,533	2,258,467
	12/31/2019	329,756	2,270,244
	6/30/2020	317,979	2,282,021
	12/31/2020	306,202	2,293,798
5)
Date	General Journal				Debit	Credit
6/30/2019	interest expense				76,777
	Discount on bonds payable					11,777
	cash					65,000
31/12/2019
	interest expense				76,777
	discount on bonds payable					11,777
	cash					65,000